100 mills are in danger line, warning Itaú BBA
The uneasy economic climate, with high interest rates and the near future without progress, signals a sad new episode for the sugarcane industry, which already faces worse crisis three years ago.
In an interview to JornalCana Portal, Alexandre Figliolino, head of Agribusiness of Itaú BBA, draws a short-term negative estimate for part of the 300 mills in operation this crop 2015/16 under way in the Center-South region of the country and that should be started from September the North and Northeast regions.
The interview was conducted during the VII Symposium of Production Technology of Sugarcane realized by the Fundação de Estudos Agrários Luiz de Queiroz (Fealq) between the days 15, 16 and 17/07 in Piracicaba (SP).
Figliolino gave a talk at the opening event on the theme “What to expect of the sugar market, ethanol and energy for next years.”
Check out the interview.
Assess the crisis faced by the sector
Alexandre Figliolino – The sugarcane industry through its greatest crisis of recent times. It already lasts three years. With sugar prices depressed in the international market, the lack of definition of public policies for ethanol and absence of long-term price increases for gasoline will continue to aggravate the situation in the foreseeable time horizon.
This all occurs in a year within increasing ethanol consumption?
Figliolino – Yes, this year should be consumed 30 billion liters of ethanol. To improve the profitability of the sector, there is dependence [of actions] Government in relation [to increase] the Cide on gasoline and international parity prices of gasoline. The gap is now 20%.
What other actions can be taken by governments?
Figliolino – Increased anhydrous mix in gasoline, currently at 27% and can go to 30% dreamed. And the ICMS, which had wonderful impact in Minas Gerais [which fell to 18% since last February], can also be reduced in other states.
And what is your assessment that the industry can do?
Figliolino – Raising agricultural productivity, increase industry efficiency, grow cogeneration, use corn ethanol in the off season and lengthen the period of grinding. Other long-term measures: tariff on gasoline, recognizing the competitiveness of the renewable fuel, and add greater value to the industry mix, such as cellulosic ethanol. With measures like this, the capital rate of return would leave current 6,9% per year to 13%. The productivity gain would return rate reaching 14,9%.
But there is the current economic scenario get in the way. Talk about, please.
Figliolino – The debt scenario, exacerbated by rising interest rates, endangers 35% of units in function of weight in financial expenses in its results. It is reaching its limits. We are in a very negative macroeconomic environment. The business environment in Brazil is very bad. The climate of risk aversion is huge. We are in a tightening credit environment. Only part of the industry today can claim. Another part of the sector can’t. So what should we do? To keep the business, sacrifices, for example, renewal of plantations and grind until it stops. Thus, attachment to the future. Thanks God that cane is a strong fagot.
What is your forecast for these units?
Figliolino – Those who are closer to the end of the line is able to move two, three crops.
How many plants in the country are in this risk line?
Figliolino – About 100 units are in continuous worsening situation. It has a limit.
And what to do? Create a Proer for these units?
Figliolino – Today is difficult. Much would depend on the improvement in conditions.
And attract investors from outside Brazil?
Figliolino – The industry needs to become more attractive so that outside capital to enter, so that asset prices to recover. What happened today is that the debt per ton grew and trading values that potential investors would be willing to pay are much lower. It has company today with its value negative.
Then there is no way out?
Figliolino – There is no nice way out.